North Dakota: No Class Action provision in Arbitration Agreement Not Unconscionable (Web)

On March 31st, 2005, the North Dakota Supreme Court answered two certified questions from the U.S. District Court for the Central District of California.  In its answer, the court determined that under North Dakota state law, a “no class action” provision in an arbitration agreement was not unconscionable.  The second question, whether the term was severable from the rest of the arbitration provision, was not reached because of the pro-enforceability ruling.
 
Although carefully noting that determinations of unconscionability are dependant on factual circumstances, the court’s ruling still deals a blow to those seeking to avoid such limitations.  Justice Kapsner, writing for high court, declared that under North Dakota law some measure of both procedural and substantive uncounscionability would have to be present for a contract term to be unconscionable. 
 
After finding that the credit card agreement had “the classic hallmarks of procedural unconscionability” the court found that it was not substantively unconscionable.  Although it observed that “contract provisions which limited or excluded the substantive remedies otherwise available at law and left the plaintiff without an effective remedy were substantively unconscionable” the opinion declared that “merely restricting the availability of a class action is not, by itself, a restriction on substantive remedies.  The right to bring an action as a class action is purely a procedural right.”
 
The ruling gave some indications of its limited scope.  After noting the fact intensive nature of unconcionability determinations, Justice Kapsner reasoned that the arbitration in this case would take place in the consumer’s home jurisdiction, that the Bank would advance fees and costs, and that the consumer would be entitled to attorney’s fees if successful.  In other words, “the arbitration provision between [the consumer] and the Bank creates a chance that [the consumer] can be made whole through individual arbitration.”  Additionally, the court relied on the attorney fee shifting as an indication that the consumer could probably find some lawyer willing to take his case.
 
The opinion can be found at 2005 WL 729135, 2005 ND 68.  
 

- Mark Boyko